The Behavioral Approach Focused on Mental Processes

question 3

True/False

The behavioral approach focused on mental processes.

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Definitions:

PEG Ratio

A stock's price-to-earnings ratio divided by the growth rate of its earnings, used to determine the relative trade-off between the price of a stock, the earnings generated per share, and the company's expected growth.

ROE

Return on Equity, a measure of financial performance calculated by dividing net income by shareholder equity, indicating how effectively management is using a company’s assets to create profits.

Earnings Retention Ratio

The earnings retention ratio, also known as the plowback ratio, measures the percentage of net income that is retained in the company rather than being paid out as dividends.

Market Capitalization Rate

Market capitalization rate, or "cap rate", is used in evaluating and comparing the expected returns on investments in the equity market, reflecting the cost of capital for a company.